"Free" Checks in the Mail May Come With Costs

March 5, 2004

State Banking Commissioner John P. Burke advises consumers to think twice before cashing unsolicited checks sent to them by their credit card company. These checks are real, and if cashed, the money is theirs. But, beware, the price consumers may pay could be much higher than the amount of the check.

For example, the banking department learned of one major credit card company that recently mailed actual checks to their customers in the amount of $4.00. Cashing the check enrolls a consumer in a program that claims to offer money-saving benefits on purchases at major retailers. If the consumer fails to cancel this membership within a 30-day trial period, a first year's membership fee of $139.95 is automatically charged to the consumer's credit card account.

Commissioner Burke said, "I am concerned that consumers will simply cash checks they receive in the mail without full knowledge of the consequences. The act of cashing one of these checks establishes an agreement between a consumer and their credit card company, and I want to be sure that the consumer knows exactly what that agreement means."

In this case, cashing a $4.00 check leads to a $139.95 charge to the account. While this information is mentioned once in the solicitation letter, consumers are often hasty in cashing checks before realizing the full implications of the solicitation.

"These types of solicitations primarily focus on the benefits of the program and not on the exorbitant membership fee charged to those who cash the checks," said Commissioner Burke. "Even solicitations from your own credit card companies should be studied carefully. Be sure to read the details of the solicitation and be aware of the benefits and the costs."

If consumers have any questions or concerns they may contact the Department of Banking at 860-240-8230, or toll-free 1-800-831-7225.